The RBNZ surprised markets with their outlook and their intended monetary policy direction, while leaving rates and QE unchanged, as expected. The RBNZ had a very bullish view of the economy and outlined a strategy of 150 bps rises commencing May 2022! This is an ‘early and hard’ strategy and is the first Central Bank to outline a plan that addresses the economic recovery and the battle against inflation. The NZD bolted above 0.7300, in reaction, although calmed the rise, as the USD posted across the board gains overnight. The AUD drifted lower, falling to 0.7740, in the face of the rising reserve.
The ECB firmly rejected any ‘tapering’ of monetary policy and QE, which immediately destabilised the EUR, which plunged below 1.2200. The rising reserve pushed the GBP back to 1.4120, as the Fed now struggles with tapering, timing becoming the key issue.
Inflation and growth remain central to market direction, while lack of data see equities float in irons.